be to extend the time line that our local sales tax is tied to the state sales tax rate, so that if the state recomposes its sales tax hours will not be additive to that. instead, ours will go away. currently, we started this proposal with a time line for those to be linked together only leading up through this election, under the thought the state may be calling for an election this year to we extend their tax. a subsequent version extended that to one year. the amendment we have been talking about would extend that now instead through 2016, which is the final year of our five- year financial plan. the idea being that we would lock in over the course of the five-year financial plan the principle that if the state

reimpose is there 1 cent sales tax, it will -- the interplay will last over the life of the five-year financial plan. we will discuss what is appropriate for the city and whether or not it is appropriate to continue to collect our local sales tax. but an automatic link between the two would no longer be in effect. i think there has been a lot of

good policy discussion, especially on what the appropriate length of time is to have it in place. we have had it pretty clearly from the small business community and the small business commission. they have endorsed this proposal with the condition they would like to see this timeline extended. we've heard from others the would also like to see that. we would like to balance that against our own financial planning constraints. i think the date set forward in this are a reasonable middle ground. they are tied nicely to a five- year financial planning process and would give us some financial certainty moving forward. that is the amendment. there are also a couple of smaller cleanup changes that do not affect the principal

legislation, but those are the major pieces. chairperson chu: just a quick clarification to the city attorney or to you. with regards to the provision that it does go away if the state were to reimpose the sales tax, one question i did have -- in a situation where we had the city sales tax that went into effect, our rate would be lower than what it was. if the state came back, the 50 cents would go away, and we would be known -- no worse off than we were before. what happens if the state does not impose a full 1%? say they imposed a 0.75%. would that still impact our 50 cents sales-tax -- our 0.5% sales tax? >> we do address a scenario

where the state would impose a partial sales tax. under the current version, that would not cause our have sent to go away. under that scenario, we could end up with a sales tax a quarter cent higher than we have been over the last couple of years. one of the amendments to the legislation is to change that so that if there is a 0.75% state sales tax imposed hours would go away. so if the state we imposes a sales tax of 0.5% or less, hours remains in place. our sales tax rate would be no higher than it has been over the past several years. if they impose anything greater than that, hours -- ours would automatically be ascended -- rescinded. chairperson chu: we do have an economic analysis from the

controller's office and a report from the budget analyst. >> been rosenfield from the comptroller's office. mr. egan is on a well-earned vacation. i thought i would briefly touch on a couple of the highlights from our report, which we issued yesterday. to start with, just a bit of background on what the sales tax looks like in san francisco.

this is one of the more complicated revenue streams statewide, with different components laird on by different levels of government, flowing to the benefit of different people. if you look at our current 8.5% sales tax rate, as mr. wagner noted, down from 9.5% on june 30 -- almost 2/3 of that flows to the state itself. a small piece is then reallocated back out to local governments. about 1% of it, in a sense, flows directly to the city's general fund, and that rate fluctuates in different jurisdictions, based on choices voters have made. in san francisco, we have about 1.25% of the 8.25% that flows to in part, the transportation authority, and our schools.

in effect, this proposal would create a new 0.5% that would be dedicated within the local category to support current the general fund supported expenditures -- currently general fund supported expenditures. as we discussed in the report itself, our sales tax rate in san francisco is comparatively higher than most other jurisdictions in the state. with this change, we would have the highest sales tax rate of the largest tent cities in california. as you can see from this chart, this proposal would move our sales tax rate in san francisco from kind of mid to high in our peer group in the bay area to the highest, at 9%. this does not make any assumption about other jurisdictions pursuing sales- tax rates increases. i am not currently aware of any

impact in the bay area. there are currently no proposals for transportation or other general fund expenditures in other places. as of today, this is what the world looks like. the issue of equity, of course, arises whenever we talk about different revenue or different taxes. generally, sales taxes are considered to be inherently regressive, because low income families tend to pay a larger percentage of their income on goods subject to sales tax and a wealthy family or a business would. this is somewhat mitigated in san francisco by some unit misses to our sales tax base and our consumption of goods in the city. in san francisco, the greater percentage of our sales tax is generated by non-residents and businesses. about 30% of sales taxes generated in the city -- about

37% of sales taxes are paid by visitors who are tourists or do not live here. about 14% are a result of business to business sales. so about half of the sales tax is not paid by residents directly. this is further mitigated to a point in california by the fact that california has a state sales tax system that exempts certain types of goods and services from sales tax. food, for example, is largely exempted from sales taxes. that would be one of the more progressive components of a sales tax in states where food is taxed. in terms of the impact on the local economy, there are with the two effect here. they pushed downward on job growth in the private-sector, estimated in our modeling at approximately 150 jobs per year

for the duration of the tax. that is offset by more money available for government spending. the net is an economically positive 59 jobs. i wanted to hit a couple of high points. chairperson chu: a quick question. on page four, the comparison of san francisco sales tax rate compared to the 10 neighboring cities -- is it fair to say, because you have held this data, showing what emeryville and berkeley, the rate card is -- currently is -- this is reflective of the drop state why? >> correct. all of these jurisdictions would have been a percent higher in month and a half ago. chairperson chu: in terms of other actions, we are not sure if other jurisdictions are doing a similar manner.

do we have any information about whether some of these other local organizations or institutions are going to be considering this? >> i am not aware of any on this november's ballot, but have not researched the question. chairperson chu: thank you. >> it is worth saying that this is a dedicated tax year under prop. 218, so other jurisdictions would have to pursue a 2/3 but as well. that might be having a chilling effect on other proposals. chairperson chu: mr. wagner? >> the other piece of the answer to that question has to do with the timing under which the state finalized its budget. so just as we were waiting to hear news about whether the state was going to extend its sales tax while we were going to the process of our deadline to submit measures for the ballot,

so were other counties. by the point in time where the state budget was finalized, i think in a lot of places it was too late for them to submit a measure for the ballot, had they wanted to. we started in this process earlier in the spring, initially with the understanding that we were not certain what the outcome of the state was going to be, but that we would have to spell that measure as a contingency. had we awaited the outcome of the state budget, we would have been late as well. so i think there may be a timing issue. and i think it is possible that you could see some actions by other counties that are similar, going forward once they have the time to develop this proposal. chairperson chu: thank you. mr. rose? >> madame chair and members of the committee, i think both mr.

wagner and mr. rosenfield have provided you with comprehensive reporting on this matter. the only thing i would add is that mr. rosenfield has advised our office that projections of a 1% sales tax would be $120 million, so the half percent would reconcile to $60 million. as you know, if this is divided equally, if the board decides that would be an equal distribution, it would be $30 million for public protection and $30 million for children's services and seniors. we consider approval of this legislation to be a policy matter for the board of supervisors. supervisor mirkarimi: just a quick question to either the controller or budget analyst were mayor's office. is there any city outside of california that has sales tax at the magic 10%? who are those?

i mean, it is tangential, but i know how cities are trying their best because of the obvious, i think -- >> i do not know that i can speak to every jurisdiction in the country. but in the report itself will provide examples of some of the higher tax rates in other major cities in the u.s. on page 3. these include chicago, which has a 9.75% sales tax rate, seattle, which is 9.5% -- supervisor mirkarimi: over town. that was my question. is there anybody over 10? >> not that i am aware of. i think there is probably a psychological barrier. before, prior to the 1% rollback, there were some smaller jurisdictions in california that were a little

bit over 10%. none of the major cities. but we would be happy to get you the full list and provide that to you. there were a couple of them. chairperson chu: thank you, and figure for the reports. all other members of the public who wish to speak on this item? >> jim lazarus, chamber of commerce. there is a state report that just came out. riviera and avalon were both over 10%. another in the bay area was at 10% before the robot. the chamber appreciates the efforts of the city on the amendments regarding the roll back issue should the state go forward with the restoration of their tax rate in the future. we are prepared to support this ballot measure with the rollback language that is before you today. we believe it is important that we not get too out of sync with the other bay area communities. we happen to have some state

legislative authority that i think has been around for decades, which is why this measure could be before you today. communities do not have the authority to raise the tax rates without implementing state legislation. san francisco has had legislation on the books from sacramento and has allowed us to go up three-quarters of a percent. it has never been presented to the voters until now. i do not know whether other bay area communities have unused authority. but clearly there is a competitive issue when you can go shopping in one county and pay an 8% tax at the moment, and if this passes next year you will be paying a 9% rate in san francisco. the san would be true of taxes on restaurants or any recreational activity. it is a concern to our business community that we not get out of line with competitive bay area

locations. however, we were living within 9.5% tax rate through june 30. with the appropriate role back language before you, we can support the legislation. chairperson chu: thank you. are there other members of the public who wish to speak? seeing none, public comment is closed. can we take the amendments without objection? and this item, because it has been amended, does need to sit and allow for additional public comment. can we continue this to a second -- to a meeting on this coming tuesday? that will be the case, without objection. do we have any other items before us? >> that completes the agenda for today. chairperson chu: thank you very much. we are adjourned.